Thursday, April 6, 2017

Putting poverty in perspective

The average value of assets held by a household in decile 10 in urban India, or the richest 10%, is Rs1.5 crore. That is 50,034 times the average value of assets held by an urban household in the lowest decile. It’s 18.7 times the average value of assets held by a household in the 6th decile. And it’s 4.1 times the average value of assets held by a household in the ninth decile, one rung lower than the top 10%... If we count the assets of the poor, we find the poor do not count... The household in the poorest decile — decile 1—will then have Rs291, the one in decile 2 assets worth Rs9,565 and so on. The richest household will then have assets worth Rs1.5 crore. But if we add up the total value of assets held by all the rest, that is the other nine households, that amounts to Rs82,90,418. In other words, the richest household’s assets are worth much more than that of all the others combined.

To put this in perspective, with Rs 35,13,327, the average wealth of those in the 9th decile, it would not be possible to buy a two bed room house in any large city! Forget house, a family in the sixth decile would just be able to afford a decent car, and that too only if they mobilise all their assets!

This tallies with the findings of every survey, public and private. Poverty is far deeper and pervasive than we all believe. And the vast majority of those we consider above the notional poverty line are not much better off than their below poverty line counterparts. They are maybe one shock away from slipping back to poverty.

It is for this reason that I am not a big fan of the current outsized focus on screening subsidy leakages. Yes, pilferage should be arrested. But inclusion errors are not exactly as bad as we think. And we haven't even got to this, this and this.